As we navigate new stages of the Covid-19 situation, the critical role of tax in our recovery continues to be at the fore, as governments, societies, businesses and individuals all collectively strive to “build back better.”
This is true both for policy options that can drive recovery and at the micro-level within organisations. Here, the role of the tax leader is crucial both for organisations themselves and for the societies they serve.
Tax leader as enabler for economic recovery
Tax has been an important lever for governments in the immediate response to the pandemic, and it will remain crucial for stimulating the economy and paying for recovery in a post-Covid world.
While interest rates are currently low, over time, the expectation is that policy makers will look at tax options for raising revenue. Also, tax administrations are likely to take a harder line on audits and collections, which could pose additional challenges for organisations.
The pandemic situation has intensified pressures on tax leaders to put processes and technologies in place to ensure compliance with tax obligations. Advising senior leadership as to the best approach for their organisations included the consideration of government relief options available; for many, this was as much about advising against using certain relief measures, where not essential to sustaining the business, as it was about tapping into reliefs where necessary.
Now, tax leaders will need to be prepared to help their organisations account for their positions, articulate the steps that they took to shore up their businesses, account for any reliefs leveraged, and demonstrate the ways in which they contribute to economic recovery.
Tax leader as navigator in the risk landscape
Covid-19 has intensified many of the tax risks that were in play before the pandemic, including movement of employees across borders, the prevalence of working outside of home jurisdictions, potential supply chain failure and territorialism resulting from increased protectionism.
While the OECD continues its efforts to foster common principles for taxing digital transactions, unilateral digital services taxes continue to proliferate, heightening the potential for double taxation and costly disputes. These developments increase uncertainty, add new intricacies for compliance, and lead to more complex risks.
Tax leaders need to navigate this troubled landscape with their executive teams, not only by mitigating risks, but also by finding opportunities through the emergence of new business models, new ways of working and, most importantly, through digital transformation.
Tax leader as innovator for the new reality
Across businesses, the pandemic has accelerated trends in digitalisation and technology-enabled ways of working. Within tax functions, skills in technology and digital capabilities were highly sought even before the pandemic, and this need has intensified. Tax teams that were experimenting with tools and platforms for improving the efficiency and accuracy of their tax compliance work are now being asked to roll-out changes across wider operations, and fundamentally rethinking their tax operating models.
Tax departments that may have been slower to transform or incorporate technology before the pandemic, or which had previously not had the internal support to pursue these tools, will need to fast-track their efforts.
Regardless of the stage of digital transformation their function is in, tax leaders will need to go even further than they did in 2020. They must look beyond investment in tools for collaboration and compliance to document management systems, workflow automation and deep data analytics in order to keep pace with compliance obligations, tax authority expectations and new ways of working.
Tax leader as communicator
Running through each of these roles of the tax leader in 2021, perhaps the most important of all is their role in communications and stakeholder management. How businesses conduct themselves during this time, and through the journey out of it, will be crucial to recovery. With the increased call for business transparency, tax departments will need to be able to articulate clearly the value they are adding – both inside and outside of the organisation.
Ultimately tax leaders can help their organisations to see the present not as a barrier to progress but as a springboard to something better for the tax department and the business more broadly. Clear communication with leadership and boards will be key to success in embracing the new world, and in ensuring the tax leader has the support necessary to bring to life that new reality.
By David Linke, global head of tax and legal services, KPMG International